The U.S.-China trade war has turned into a blame game, with each side accusing the other of backtracking – pushing talks to the brink of collapse. According to some observers, China’s strategy for dealing with the U.S. has changed amid the new tariff threat from Washington, with Beijing losing hope in U.S. President Donald Trump and seeking to steer global opinion in its favor. Any hope of a fast resolution to the trade row faded after Trump said he would impose a 10% tariff on USD300 billion worth of Chinese imports, because China had failed to buy American farm products. But Cong Liang, Secretary General of the National Development and Reform Commission (NDRC), called such claims about agricultural products “unwarranted accusations”.

Cong said that as of August 2, China had completed purchases of 130,000 tons of soybeans, 120,000 tons of sorghum, 75,000 tons of hay, 60,000 tons of wheat, 40,000 tons of pork, and other products. Companies from both nations had signed agreements for transactions on 14 million tons of soybeans, he said. Of that total, 300,000 tons were due for shipment in September.

U.S. President Donald Trump said on August 9 that a trade deal with China was “not ready” to be struck – reiterating his charge that Beijing has been manipulating its currency – and injected doubt into the timeline for trade talks, which are expected to resume in September. Saying that while the U.S. was doing very well with China and that the two sides continue to talk, “we’re not ready to make a deal, but we’ll see what happens,” Trump told reporters.

Tensions escalated, when China ordered an immediate halt to new purchases of U.S. farm products, accusing Washington of violating agreements made between Trump and Chinese President Xi Jinping in June, and the U.S. designated China a currency manipulator. “I guess that President Xi is disillusioned, and even angry. So soon after the resumption of talks, after the Shanghai negotiations, Trump declared a major escalation. This is, I think, the straw that broke the camel’s back,” said Shi Yinhong, Professor of U.S. Affairs at Renmin University of China. Suspending purchases of U.S. agricultural goods indicated the level of anger over the move, he added. Shi said that in the near future, there was little hope the two sides could reach an agreement that would last more than a few months. “There is so much mutual anger on the Chinese side and on the U.S. side. Not only is this becoming a protracted trade war, but it’s an escalating, protracted trade war,” he said.

Yu Yongding, a senior Chinese government adviser, said that there were risks of a global recession even without the U.S.-China trade war, and that the recent escalation of the conflict clearly amplifies those risks.

A day after the administration of U.S. President Donald Trump branded China a currency manipulator, China accused the U.S. of “deliberately destroying the international order with unilateralism and protectionism”, further escalating the war of words between the two countries. The People’s Bank of China (PBOC) said it “deeply regretted” the move by the U.S. and said such behavior “seriously undermined international rules” and damaged the global economy. “The responsibility of big countries is to provide the world with stability and certainty while creating conditions and opportunities for the common development of all countries,” according to an editorial in the People’s Daily newspaper. U.S. Treasury Secretary Steven Mnuchin from his side accused China of manipulating its currency “to gain unfair competitive advantage in international trade”. His department said China’s actions violated its commitment to refrain from competitive devaluation as part of the Group of 20 industrialized countries.

The U.S. action came after China allowed the yuan to weaken past the key seven-per-dollar level for the first time in more than a decade. After determining a country is a manipulator, the U.S. Treasury is required to demand special talks aimed at correcting an undervalued currency, with penalties such as exclusion from U.S. government procurement contracts. Arthur Kroeber, Founder and head of research at Gavekal Dragonomics, suggested that the U.S. Treasury’s move shows that Trump is “no longer very interested in seeking a deal” to end the trade war. Tony Nash, the CEO of research firm Complete Intelligence, said that Trump is unlikely to change trajectory at this point and that the issue is “not about the Chinese yuan in isolation”.

Most analysts said that the latest feud over China’s alleged currency manipulation would cast a pall over the next round of trade talks planned for September. “The decision to designate China as a currency manipulator is toothless and meaningless. All it means in practice is that the U.S. would have to enter into talks, lasting up to one year, with China to resolve the matter,” said Gal Luft, Co-director of the Institute for the Analysis of Global Security in Washington. “But since the two countries are already engaged in intense talks without much progress there is very little the U.S. can do. Once the new round of tariffs is introduced, the U.S. will not have many arrows left in its quiver to fire at China.” Larry Summers, former U.S. Treasury Secretary, wrote in a tweet that the world was at “the most dangerous financial moment since the 2009 Financial Crisis with current developments between the U.S. and China”.

Meanwhile, China is taking measures to slow down the slide of the yuan. China’s central bank will sell CNY30 billion worth of short-term yuan-denominated securities in Hong Kong on August 14, signaling its plan to absorb offshore liquidity and cushion against further depreciation of its currency versus the U.S. dollar. “It is a clear message that the PBOC is preventing the yuan from sharp devaluation, and that China does not want to materialize the yuan as a weapon this early,” said Zhou Hao, Economist at Commerzbank in Singapore. The bill issuance was seen by the market as the most efficient way to absorb offshore liquidity and dampen down speculation that would otherwise drive the yuan to depreciate faster, the South China Morning Post reports.

The International Monetary Fund (IMF) provided little or no support for U.S. President Donald Trump’s assertion that China is manipulating its currency for an unfair trade advantage. In an annual review of China’s economic policies, the IMF said Beijing actually took steps last year to prop up the value of its currency after the renminbi declined against the dollar between mid-June and early August 2018. Overall, the currency “was broadly stable” over the past year, depreciating by just 2.5% against a basket of foreign currencies used as a benchmark, the IMF said.

Despite the trade war, China’s exports grew by 3.3% year-on-year in July, while imports fell 5.6%, which was slower than analysts expected. China’s overall trade surplus was USD45.06 billion in July, down from USD50.98 billion in June. The overall increase in exports runs counter to expectations of a slump. According to the purchasing managers’ index (PMI) for June, for which manufacturers were asked questions about their outlook, producers were negative about new export orders. The gauge stood at 46.9 in July, slightly up from 46.3 in June, but below the 50.0 mark that signifies positivity. Exports from China to the U.S. fell yet again in July, dropping 6.5%. China is also buying fewer American goods with imports from the U..S. falling 19.1% in July, marking 11 months out of the past 12 in which China’s purchases of U.S. products fell.